The Central Bank of Nigeria on Tuesday cut the Monetary Policy Rate by one percentage point to 11.5%, in a bid to stimulate borrowing and lending to boost economic activities.
That was the key decision by the Monetary Policy Committee of the central bank, as it noted that the economy will likely continue to contract for rest of the year, from the impact of the Covid-19 pandemic.
“On the domestic economy, staff forecast suggests that the
economy may continue to grapple with the effects of the
pandemic throughout the rest of the year,” governor Godwin Emeefiele said in his concluding speech.
“With persistent focus on activities meant to reverse the contraction, the MPC projects growth at positive levels in Q4 2020, or latest by Q1 2021, based on the anticipated positive results from the coordinated and sustained interventions by both the monetary and fiscal authorities,” me said.
The economy contracted in the second quarter of this year, and the federal government has also projected a further decline in output in the third quarter, which will lead the economy into its second recession in four years.
The committee noted that a loose policy stance would provide cheaper credit to improve aggregate demand, stimulate production, reduce unemployment and support the recovery of output growth, Emefiele said.
The committee adjusted the assymetry corridor from +200bps/-500bps to +100bps/-700bps, thus putting Standing Lending Facility Rate and Standing Deposit Facility Rate to 12.5% and 4.5%, respectively.
“This reinforces the strong position of the CBN and broader MPC at sustaining the low yield environment,” an analyst said.
With the reduction of the MPR to 11.5%, the deposit rate now falls further to 1.15%, from 1.25%.
